Europe low-priced June PE PP selling spree leaves grades short

06 July 2012 10:45[Source: ICIS news]

LONDON (ICIS)--A selling spree of polyethylene (PE) and polypropylene (PP) at the end of June by European producers, at levels often below €1,000/tonne ($1,235/tonne) FD NWE, has left some commodity grades short as demand has surged on higher feedstocks, sources said on Friday.

“I will put an extra four days’ stock in my warehouse,” said a buyer who had been working on almost zero stock levels as polymer prices fell in May and June. “August will be the same price or higher, there’s no danger there.”

“People I haven’t sold to in two months are ringing me asking me for 20, 30 extra trucks that I can’t supply,” said a re-seller.

“We are sold out of a lot of commodity [PE] grades now,” said a seller who admitted selling end-June volumes below €1,000/tonne FD (free delivered) NWE (northwest Europe).

Many spot sales have now been brought to a halt and new offers are being made at much higher prices.

“This morning I have been offered PP at €90-100/tonne more than I paid only last week,” said a spot buyer on Friday.

This sudden change in the market has stemmed from the sharp reversal in in crude oil and naphtha prices that began on Friday 29 June, just hours after the settlement of July ethylene and propylene contracts in Europe, both down by €170/tonne.

PE and PP prices have been in freefall since May, when naphtha prices first started to ease.

Homopolymer injection prices have lost as much as €350/tonne since May, to trade at €1,000/tonne FD NWE and sometimes below at the end of June. Low density polyethylene (LDPE) spot prices fell to below €1,000/tonne FD NWE, from €1,400/tonne FD NWE in April.

Monthly discussions for July PE and PP will be more complex, as some buyers have already managed to secure a decrease of €170/tonne for both PE and PP. Some producers are now withdrawing their low offers to buyers.

INEOS says it will limit any decrease to €70/tonne in July PE and PP, but acknowledges that it will be above the general market, with regard to business done so far this month. Discussions are expected to be protracted, particularly in the LDPE sector, that often settles retroactively.

Traders have generally stopped offering for July as they wait and see opportunities that have not been open to them for some while. In May and June producers’ spot offers were too low for them to compete.

PE and PP are used widely in the packaging industry, and PE is also used in the agricultural sector. PP is also used in the automotive sector.